1. Technical Field
This invention relates in general to financial systems and, more particularly, to a financial system for low-wage or transitory workers.
2. Description of the Related Art
Every wage earner has a need to invest at least a portion of his or her earnings. Many workers are able to invest money in a retirement plan and/or other investment vehicles. Retirement plans provide at least two significant benefits to participants. First, for people who have trouble saving money, a retirement plan can take an agreed upon amount from the participant's paycheck, thereby automatically providing discipline. Second, even for people who are diligent savers, money can be invested in stocks and bonds that historically have a greater rate of appreciation than simple interest provided by a savings account or certificate of deposit.
Nonetheless, many employers do not provide investment options to their employees. This is particularly true for certain categories of workers, particularly low-wage or transitory workers. Restaurant employees are typical of this worker category, although other groups, such as hotel workers and salespeople, would fall into this category as well, since a large percentage of their earnings come from gratuities/commissions, rather than wages, and because they switch jobs frequently. Even if a restaurant worker was diligent about saving money, the opportunities for investment would be limited to relatively small amounts of money and very few investment advisors would be interested in maintaining such a small account. Additionally, many workers accrue credit card and other debts that may charge significant interest. Without a savings strategy, it is difficult to retire this debt.
Many workers also have difficulty in saving to meet their tax liability. In areas where employees receive a significant amount of income through gratuities, saving is particularly difficult, since much of the worker's income is received in cash for each shift they work and, hence, is never deposited in a bank. For many years, it has been suspected that cash tips are under-reported—i.e., that some employees do not report the full amount of cash tips, which are not documented by the employer. Recently, it was ruled that the employer can be liable for taxes on estimated under-reported income. For example, if the Internal Revenue Service estimates that cash tips for a restaurant should be 14%, and the restaurant has reported less than that for its employees, then the restaurant is liable for the taxes on the difference.
Accordingly, a need has arisen for an investment system that accommodates the transitory and low wage workers. Further, a need has arisen for a cash reporting, collection, tracking and management investment system that withholds and reports a proper amount of income associated with gratuities.